Network virtualization plays a crucial role in the operation of datacenters, with two different approaches generally used to achieve network virtualization. In the overlay approach, the physical datacenter network is used as a packet carrier, and the network functionalities (of the logical networks) are separated and implemented in the upper overlaying layer. A common technique is to embed logical L2 (data link layer) packets in physical L3 (network layer) packets. In the underlay approach, the physical network devices (e.g., switches, routers) are programmed based on the logical network model, so that the physical datacenter network acts as both the packet carrier and logical network provider.
Using overlays provides flexibility, but the network stack includes five layers rather than three for IP networking. The extra protocol layers consume extra physical network bandwidth, which means less bandwidth is available for the actual payload. In addition, the packet encapsulation and resulting fragmentation and checksum calculation use extra CPU cycles, which otherwise would be available for guest workloads (e.g., virtual machines). As such, other techniques for network virtualization would be useful.